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| Supporting industry: low quality, high price |
Vietnam's Supporting Industry: Challenges and Opportunities for Growth
Data from the General Statistics Office of Vietnam reveals that there are approximately 5,000 supporting industry enterprises nationwide. However, the scale and capacity of these enterprises are still limited.
Supporting industry products are currently being supplied both domestically and in international markets, with major export destinations including Korea, Japan, China, and the US. Vietnamese supporting industry enterprises are actively working on improving their capabilities through training and the integration of scientific and technical advancements into their production processes.
According to the Ministry of Industry and Trade (MoIT), there are about 100 enterprises serving as tier-1 vendors for multinational corporations, with approximately 700 businesses as tier-2 and tier-3 vendors. In the electronics sector, Samsung alone has around 50 tier-1 vendors and 170 tier-2 vendors. In the field of mechanical engineering and automobiles, about 12 businesses are tier-1 providers to Toyota.
The localization rate of supporting industry products has seen significant improvements in recent years. Textiles, garments, and footwear have a localization rate of 45 - 50%, while mechanical manufacturing stands at 15 - 20%. The automobile manufacturing and assembly sector ranges from 5 - 20%, with some vehicle products showing even higher localization rates.
Despite these achievements, the supporting industry still faces limitations. These enterprises remain in the low value-added segment of the supply chain, and their capacity is still limited. The connection between supporting industry enterprises and FDI enterprises needs strengthening.
Nguyen Van, Deputy Director of the Hanoi Supporting Industry Association, points out that many Vietnamese supporting industry products lack competitiveness due to high prices and not meeting quality and technical compatibility requirements.
To address these challenges, state and local management agencies, along with industry associations, need to intervene more robustly. Policy tools and mechanisms should be used to assist businesses in improving productivity and quality, thus narrowing the gap between multinational corporations' requirements and domestic manufacturing enterprises' capabilities.
Regarding policy issues, Pham Tuan Anh, Deputy Director of the MoIT’s Industry Agency, mentioned that the government has assigned the MoIT to amend Decree No 111/2015/NĐ-CP on supporting industry development. However, the revision process has encountered challenges due to varying perspectives among ministries and branches on business support issues. — VNS
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